Examination

2
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AICACC Examination

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1 / 20

Lower the Debt Equity ratio

2 / 20

General Journal is a book of __________ entries

3 / 20

The process of recording in Journal is done

4 / 20

Capital increases if __________ increases

5 / 20

What is an engagement letter?

6 / 20

Which of the following statements is correct regarding a shareholder’s right to inspect corporate
books and records? The right

7 / 20

On January 1, the partners' interest in capital, profits, and losses of Studio Partnership were:
Partners      Percentages
Ross             15%
Stone           35%
Taylor          50%
On April 9, Stone sold his entire interest to Taylor. For tax purposes, which of the following statements is
correct regarding Studio's status as a partnership?

8 / 20

If a CPA recklessly departs from the standards of due care when conducting an audit, the
CPA will be liable to third parties who are unknown to the CPA under the law of

9 / 20

Which of the following financial instruments may be considered a derivative financial instrument?

10 / 20

Pine Co. purchased land for $450,000 as a factory site. An existing building on the site was razed
before construction began. Additional information is as follows:
Cost of razing old building $60,000
Title insurance and legal fees to purchase land $30,000
Architect's fees $95,000
New building construction cost $1,850,000
What amount should Pine capitalize as the cost of the completed factory building?

11 / 20

Sussman Co. prepared cash-basis financial statements for the month ended January 31. A summary
of Sussman's January activities follows:
Credit sales of $5,600.
Collections of $1,900 relating to January credit sales.
Accrued salaries of $1,200.
By what amount will Sussman's cash-basis income for the month ended January 31 increase as a result
of restating these activities to the accrual basis of accounting?

12 / 20

Zokro, a nongovernmental not-for-profit organization, uses the indirect method to prepare its
statement of cash flows. In determining its net cash provided (used) by operating activities, Sokro
must add back which of the following to the change in net assets?

13 / 20

During the year, Verity Co. purchased $200,000 of Otra Co. bonds at par and $50,000 of U.S.
Treasury bills. Verity classified the Otra bonds as available-for-sale securities and the Treasury bills
as cash equivalents. In Verity's statement of cash flows, what amount should it report as net cash
used in investing activities?

14 / 20

Which of the following is an essential element of the audit trail in an electronic data interchange (EDI)
system?

15 / 20

Star Co. is a retail store specializing in contemporary furniture. The following information is taken from
Star's June budget:
Sales $540,000
Cost of goods sold 300,000
Merchandise inventory–June 1 150,000
Merchandise inventory–June 30 180,000
Accounts payable for purchases–June 1 85,000
Accounts payable for purchases–June 30 75,000
What amount should Star budget for cash disbursements for June purchases?

16 / 20

A 20% target contribution margin is set for Duct, which is a new product with the following unit costs:
Manufacturing costs

Variable $12
Fixed 8

Selling & admin. Costs

Variable $3
Fixed 5

What is Duct's target selling price?

17 / 20

Which of the following is an element of a CPA firm's quality control policies and procedures applicable
to the firm's auditing practice?

18 / 20

Describe risk analysis

19 / 20

Which of the following is an element of a CPA firm's quality control policies and procedures applicable
to the firm's accounting and auditing practice?

20 / 20

The purpose of establishing quality control policies and procedures for deciding whether to accept or
continue a client relationship is to

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